TransDigm(TDG) - 2025 Q4 - Annual Report

Revenue Sources - Approximately 55% of net sales in fiscal year 2025 were generated from aftermarket revenue, primarily from commercial and military markets[13] - The defense market, including defense OEMs and aftermarket sales, generally accounts for approximately 35% to 40% of annual net sales[23] - Approximately 30% to 35% of annual net sales come from the commercial aviation aftermarket, while the defense market accounts for about 35% to 40% of net sales[23] - The top ten customers accounted for approximately 40% of net sales in fiscal year 2025, with no single customer exceeding 10%[24] - The top ten customers represented around 40% of net sales for fiscal year 2025, with no single customer exceeding 10% of total sales, indicating a diversified revenue base[24] Business Strategy - The company’s business strategy includes a selective acquisition approach to enhance financial performance through integration and operational improvements[14] - The company’s business strategy includes obtaining profitable new business, improving cost structure, and providing highly engineered value-added products[17] - The company aims to maintain a lean cost structure while improving product costs and enhancing engineering capabilities[17] Acquisitions and Growth - The company has acquired 95 businesses since its inception in 1993, focusing on proprietary commercial aerospace component businesses with significant aftermarket content[14] Product Quality and Engineering - The company’s proprietary products are designed to meet rigorous quality and reliability standards, serving both commercial and defense sectors[15][26] - The company competes based on high-quality engineering and reliable products, which meet or exceed customer performance standards, fostering long-term supplier relationships[26] - The company’s products are designed to withstand extraordinary conditions and stresses, ensuring high quality and reliability for aircraft operators and manufacturers[15] Operating Segments - The company’s three reporting segments are Power & Control, Airframe, and Non-aviation, each focusing on different aerospace and non-aerospace applications[18][19][20][21] - The company’s operating segments include Power & Control, Airframe, and Non-aviation, reflecting its diverse business operations[18] Employee Development and Workforce - As of September 30, 2025, the company employed approximately 16,500 full-time, part-time, and temporary employees, with about 15% represented by labor unions[35] - The company emphasizes employee development through programs like TransDigm University and partnerships with local colleges for training[40] - The company emphasizes employee development through programs like TransDigm University and various recruitment initiatives to attract new talent[37] Regulatory Compliance - The company is subject to stringent regulations from the FAA and other aviation authorities, ensuring compliance in manufacturing and servicing aircraft components[27][28] - The commercial aircraft component industry is highly regulated, requiring compliance with FAA and other international aviation safety standards[27] Environmental Compliance - The company is involved in the investigation and remediation of several sites under environmental laws, but compliance did not materially impact capital expenditures or cash flows in fiscal 2025[34] Financial Performance - The company’s engineering and research and development costs are recorded in selling and administrative expenses, impacting overall financial performance[16] - The company’s net sales are generally lower in the first quarter of the fiscal year due to fewer working days from holiday observances[44] Segment Details - The Power & Control segment accounts for a significant portion of the company's operations, focusing on systems and components that provide power and control for aircraft, with major products including mechanical actuators and ignition systems[19] - The Airframe segment develops and markets systems for non-power airframe applications, with key products such as cockpit displays and safety restraints, serving airframe manufacturers and airlines[20] - The Non-aviation segment includes products for ground transportation and space applications, with primary customers being off-road vehicle suppliers and heavy equipment manufacturers[21] Diversity and Inclusion - The company maintains a strong commitment to diversity and inclusiveness, which is seen as a fundamental principle driving innovation and competitive advantage[41]